VA FIXED RATE PRODUCT

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1 Primary 1 Unit Max Loan Amount Max Loan Amount Max Loan Amount See VA County Limits LTV CLTV Min FICO Max Ratios 96.50% 96.50% 55% % 100% 50% LTV CLTV Min FICO Max Ratios Minimum Cash Investments Minimum Cash Investments Mortgage/Rental History Mortgage/Rental History Reserves Reserves 96.50% 96.50% % N/A Evaluated by DU Evaluated by DU. 100% 100% 50% LTV CASH OUT REFINANCE CLTV Min FICO Max Ratios Minimum Cash Investments Mortgage/Rental History 90% 90% % N/A Evaluated by DU GENERAL ELIGIBILITY VA Underwriting Guidelines: (Manual Underwriting Allowed) Age of Documents Must be <120 days old at time of note date. Appraisal must be <120 days old Must be a veteran with eligibility documented with a Certificate of Eligibility (COE), which will also indicates the Veteran's Entitlement. All borrowers must have clear CAIVRS Borrower Eligibility Resident Alien permitted as long as primary borrower is a veteran. CAIVRS Perform and document a CAIVRS screening on each veteran and any coborrower Coborrower Primary Primary Cash-out Refinance High Balance 1 to 4 Units 1 to 2 Units See VA County Limits See VA County Limits No seasoning. Use current Appraised value to determine the LTV. Check FNMA loan limits for Units/HB/SFR >$417,000 HB PURCHASE RATE/TERM REFINANCE Must verify assets to close Evaluated by DU 1 Unit No reserves. 2-4 units 3 months unless no rental income used to qualify Reserves Evaluated by DU. Additional reserves may be required if borrower owns other financed properties Non Occupant co-borrowers not allowed. The veteran must be the primary borrower on the loan, regardless of whether the veteran contributes income. Spouse is not required to be a veteran. Joint loans other than spouse are not allowed at this time. 1

2 IRRRL The VA loan must be currently serviced by Residential Bancorp to be eligible for a VA IRRRL transaction. If RB is not servicing the existing VA loan, then the loan is not eligible for a VA IRRRL. The purpose of the VA IRRRL is to refinance an existing RB VA loan at a lower interest rate. 1) The principal and interest payment on an IRRRL must be less than the principal and interest payment on loan being refinanced unless one of the following exceptions applies: -----The IRRRL is refinancing an ARM (Going from ARM to fixed), -----Term of the IRRRL is shorter than the term of the loan being refinanced, or -----Energy efficiency improvements are included in the IRRRL. 2) A significant increase in the veteran's monthly payment may occur with of these three exceptions, especially if combined with one or more of the following: -----financing of closing costs; financing of up to two discount points; financing of the funding fee, and/or higher interest rate when an ARM is being refinanced. 3) If PITI increased by 20 percent or more, the underwriter must: -----Determine that the borrower can support the proposed shelter expense and other recurring monthly obligations in light of income established as stable and reliable, and include Underwriter's signed certification in the loan file. This form is located within Fast under Info Center, i.e., Forms. 4) For IRRRLs 30 days or more past due (which must be submitted to VA for prior approval), the following can be included in the new loan: late payments and late charges on the old loan, and reasonable costs if legal action to terminate the old loan has commenced. Refer to VA Handbook for additional requirements and documentation. 5) Use VA Form , IRRRL Worksheet to calculate the maximum loan amount. This form is located within FAST. 6) loan term is the original term of the VA loan being refinanced plus 10 years, but not to exceed 30 years and 32 days. 7) Veteran re-uses the entitlement used on the existing VA loan - the IRRRL does not impact the amount of entitlement the veteran has in use. 8) All allowable fees and charges, including up to two discount points, may be included in the loan. 9) Cash back at closing cannot exceed $ Except state of Texas, 0 cash back to borrower. 10) Must be secured by first lien- veteran must own the property. 11) Cannot Refinance other liens - can only refinance the existing VA loan. 12) Credit report with 3 FICO scores and Mortgage Rating Only is required. You will order a Mortgage Only Credit Report. Note: The veteran can only be charged for the actual credit report fee. A copy of invoice is required. 13) : Veteran or spouse of an active duty service member must certify to prior occupancy. 14) No appraisal is required. 15) FICO score is required. Refer to rate sheet. 16) No Income verification required but the 1003 needs to have employer information completed. 17) A copy of the note may be required by the underwriter, if needed to determine the terms of the existing loan. 18) Underwriter to complete Residential Bancorp's VA Rate Reduction Certification and add a PTD condition for borrower to sign/date the certification along with loan documents. 19) VA form form will print out with loan documents and is required to be completed. 20) The Net Escrow Payoff Form is required to be sent to Escrow for completion when the borrower wants to net the escrow balance from the payoff to the new loan. A written authorization from the borrower(s) to apply the unused escrow funds to the pay-off is required. 21) The underwriter must manually include the CAIVRS Authorization number on the VA Interest Rate Reduction Refinancing Loan Worksheet (Form ). Joint Loans Joint Loans other than borrower's spouse are not allowed. Loan Terms Available 30 and 15 Year Fixed, ARMS ineligible. VA IRRRL's Not Allowed. Minimum Loan Amount: $70,000. Number of Properties Property Listed for Sale Qualifying Fixed Products Refinance of other loans of 4 financed properties regardless of subject property occupancy Owner Occupied Only, Veteran or spouse of an active duty service member must certify as to intent to occupy Properties listed for sale within the past 180 days are eligible for rate/term or cash out refinance, however cash out refinances are limited to 70% LTV. Properties listed for sale must have been taken off the market at least one day prior to the date of the application Qualify at Note Rate Allowed 2

3 Seller Contribution Appraisal Eligible Properties Fannie Mae Form 1004MC Manufactured Housing Photos Subordinate Financing SAR Termite Inspections Termite Inspections - New and Proposed Construction 30-Day Charge Accounts Bankruptcy Collections/Charge Offs Single Family Attached/Detached, 2-4 Units, PUDs. Condominiums must be approved by VA as found on WEBLGY. Not allowed. CONTRIBUTIONS Sales concessions cannot exceed 4% of the established reasonable value of the property (NOV) or sales price whichever is less. VA requires appraisers to include Fannie Mae Form 1004MC, Market Conditions Addendum. Following suit with the industry. Requirement of VA fee appraisers to include interior photographs of the subject property. a. In order to have VA valuation policy in alignment with current practices in the appraisal industry, appraisers must include interior photographs of the subject property, which at a minimum, show: (1) The kitchen. (2) All bathrooms. (3) Main living area. (4) Examples of physical deterioration, if present. (5) Examples of recent updates, such as restoration, remodeling, and renovation, if present. b. Additionally, appraisers are reminded of the following: (1) In addition to the interiors photographs required by paragraph 3 of this Circular, appraisal reports must include clear, illustrative, original photographs showing the front, rear view (preferably including a different side view in each photograph), and a street scene of the subject property and the front of each comparable sale. The subject and all comparables must be appropriately identified. (2) Photographs of comparable listings are not required, but are encouraged. (3) Include photographs of any improvement, site feature, or view affecting value. (4) Acceptable photographs include clear, illustrative images. Copies of photographs from a multiple listing service are acceptable only with an explanation why original photos are not available, i.e. gated communities where access may require trespass to photograph, etc. The HLTV must be calculated using amount designated on the recorded Mtg/Trust Deed and not based on any modified amount designated in writing. SARs must issue the NOV at the appraised value reflected in the appraisal report and may not issue an NOV that deviates from the fee appraiser s value estimate. Questions regarding appraisal errors, omissions, or discrepancies that arise during the initial review should be handled by following normal procedures involved in contacting the appraiser. If contact results in the appraiser uploading an amended appraisal report with a changed value in weblgy, the SAR must issue the NOV at that changed (current) value. Effective January 1, 2015, VA will require the use of the current National Pest Management Association (NPMA) Department of Housing and Urban Development (HUD) Forms NPMA-99-A, Subterranean Termite Protection Builder's Guaranty, and NPMA-99-B, New Construction Subterranean Termite Service Record, for new and proposed construction properties in areas where wood-destroying insect information is required. Prior Forms NPCA-99-A and NPCA-99-B will be obsolete and should no longer be used after January 1, CREDIT Borrower must have sufficient funds to cover the unpaid balance of all unpaid 30-day charge accounts (e.g., American Express). Two (2) years elapsed since the discharge of Ch 7. Ch. 13 Bankruptcy 2 years from discharge or dismissal. Payoff not required. Past due accounts must be brought current. COLLATERAL Must be ordered through WEBLGY. The NOV for the property appraised is valid for six months, Will accept transferred appraisals. Required in moderate or heavier infestation areas according to the Termite Infestation Probability Map published in the Council of American Building Official (CABO)/Required on purchaes and refis Contingent Liability / Co-Signed Loans To exclude the payment from debt ratio, 12 months canceled checks or bank statements are requirements as evidence of timely payment by someone other than the borrower Debts/Minimum Payment The greater of $10 or 5% of balance for revolving/installment accounts if payment not reporting. Include all revolving payments regardless of the number of payments remaining. HELOC: If not shown on the credit report, payments on a HELOC with an outstanding balance may be calculated at 1% of the outstanding balance or use billing statement. 3

4 Foreclosure Inquiries Judgments/Liens Lease Payments Min Trades/AuthUser Accounts Mortgage History Payoff of Revolving Debt Payoff of Installment Loans Prior Restructure Reflected in credit history Two (2) years elapsed since completion of Foreclosure, Deed in Lieu/Short Sale when the borrower was delinquent at time of transfer Credit inquiries within last 120 days require written explanation. Judgments, garnishments, and liens must be paid off at or prior to closing. Documentation of the satisfaction must be provided. The lease payment must be included in the DTI regardless of the remaining number of payments. In general, borrower is required to have one reported trade (non collection or charge-off) open for twelve months. Authorized User Accounts okay if reflective of borrowers credit history. Per A.U.S. or Underwriter Discretion In order to qualify without the monthly payment on the current balance, a revolving account must be paid off and closed. Revolving account paid thru escrow is acceptable, however must provide a credit supplement or letter from creditor to evidence the account is closed prior to funding. If the revolving account is paid off, but not closed, the monthly payment shown on credit report (or the greater of $10 or 5% of the outstanding balance, if there is not payment) must be included in the DTI. Installment debts may be paid off and cannot be paid down to less than 10 months for qualifying. Not allowed for subject property. At least 2 years has elapsed since completion date Short Refinance/Modifications Short Sale/Pre-foreclosure/Deed in Lieu of Student Loans Amended Tax Returns Assets / Reserves Bonus, Overtime, and Commission Income Current Primary Pending Sale (not closing prior) Current Primary converted to Second Home Departure Property - Converting Current Res to Investment Employed by Family Member Not allowed for subject property currently owned by borrower. Prior short refinance/modification (see short sale requirements below) At least 2 years since completion date of short sale if not late prior, 3 years if late Deferred >12 months do not need to be considered. All efforts should be made to obtain payment of deferred student loans. If unable to obtain, 2% of balances will be used as payment in determining DTI INCOME/ASSETS Original filed return and the amended return are required. Tax returns must have been amended prior to application date, If the tax returns were amended 60 days or less from the application date, evidence of payment (if any) is required. CANNOT BE AMENDED TO QUALIFY Per A.U.S. Borrower must have a two-year consecutive history of receiving bonus/overtime/commission, and the income must be likely to continue. Payment for both properties must be used to qualify the borrower with 3 months PITI in reserves after closing for both properties. Payment for both properties must be used to qualify the borrower Payment for both properties must be used to qualify veteran UNLESS rental income can be documented Documentation Requirements: Lease Agreement for at least one year (Fully executed ), proof of Security Deposit Received and deposited into borrower s account, Rent is reasonable. Rental income may NOT come from a family member Requires full documentation regardless of AUS. 2 years tax returns, W-2's and 2 consecutive current paystubs. Gifts Permitted Donor must be immediate family member, fiancé or domestic partner. The donor may not be affiliated with any other interested party to the transaction. Gift Equity A gift of equity is acceptable. The donor must provide a gift letter and gift, property must not be distress sale as evidenced by VOM and equity must be listed on the HUD-1 Settlement Statement. Income documentation Joint Accounts Follow A.U.S. Additional documentation at Underwriter discretion If an account is held jointly a letter will be required from the joint account holder to verify our borrower has 100% access to those funds. This is required regardless of the relationship. 4

5 Large Deposits LTV < 80% with large deposit that does not exceeds 25% of the borrower's total monthly income will not be sourced (At Underwriter's discretion, additional conditions may be required). Rental Income Loan Amounts $45,001 to $56,250 $22,500 Follow A.U.S. Additional documentation at Underwriter discretion MAXIMUM GUARANTEE Loan Amounts $56,251 to $144,000 Lesser of 40% of loan amount or $36k Loan Amounts $144,001 to $417,000 25% of the Loan Amount Greater than $417,000 Lesser of 25% of county limit or Ln Amt RESIDUAL INCOME CALCULATION Gross Income Less Payroll taxes withheld (From taxable income) Less Monthly housing obligations (PITI + HOA as applicable) Less Maintenance and Utilities (using Square Feet per appraisal x.14 per square foot) Less all other debt obligations (per Credit Report) Less any obligations for Child Care, Child Support, Alimony, Commute Expense EQUALS RESIDUAL INCOME (for qualifying purposes per VA) state tax withholding ALLOWABLE FEES UNALLOWABLE FEES Discount Points Lender s Inspection Appraisal Fee / Compliance Inspection Lender s Appraisal Credit Report Fee Loan closing or settlement fee Title Exam / Title Insurance Fees Document Preparation Fees Recording Fees and Recording Taxes Underwriting Fee Prorated Taxes, Assessments & initial deposit for escrow Pest Inspection Fee Hazard Insurance / Flood Insurance Well and Septic Fee Survey / Plot Plan Preparing title company or conveyance fees Federal Express and Express Mail (Refinance only) Attorney s services other than for title work VA Funding Fee Postage & other mailing charges Commitment Fee 5

6 VA FUNDING FEE MATRIX PURCHASE AND NEW CONSTRUCTION DOWN PAYMENT ACTIVE DUTY OR VETERAN RESERVIST /NATIONAL GUAURD % 2.15% 2.40% FIRST TIME USE 5% thru 9.99% 10% or More 1.50% 1.75% 1.25% 1.50% TYPE OF USAGE SUBSEQUENT USE FIRST TIME USE % 3.30% 3.30% 5% thru 9.99% 1.50% 1.75% 10% or More 1.25% 1.50% CASHOUT AND REGULAR REFINANCES EQUITY ACTIVE DUTY OR VETERAN RESERVIST /NATIONAL GUAURD N/A 2.15% 2.40% SUBSEQUENT USE N/A 3.30% 3.30% For internal use only, not for consumer distribution. This document is not an advertisement as defined in 12 CFR All products are subject to credit and property approval. Guidelines are subject to change at any time and without prior notice. Residential Bancorp, Inc Dressler Rd NW, One Bancorp Building, North Canton, OH 44720, NMLS # , California DBO CRMLA # , CFL#603J643, Equal Housing Lender. 6